Swiss Re Insurance-Linked Fund Management

Xactanalysis Insights and PCS

Muteki Ltd.

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Muteki Ltd. – At a glance:

  • Issuer: Muteki Ltd.
  • Cedent / sponsor: Zenkyoren
  • Placement / structuring agent/s: Structured by Munich Re. Aon Capital Markets acted as book runner.
  • Risk modelling / calculation agents etc: AIR Worldwide performed risk modelling and will be calculation agent for the transaction
  • Risks / perils covered: Japan earthquake
  • Size: $300m
  • Trigger type: Parametric index
  • Ratings: Moodys: 'Ba2'
  • Date of issue: May 2008
  • news coverage: Articles discussing Muteki Ltd. from

Muteki Ltd. – Full details:

Zenkyoren have just launched their second catastrophe bond deal through Cayman Islands domiciled Muteki Ltd.

Muteki covers Japanese earthquake risks and will replace it’s five year Phoenix deal from 2003 which matures in July. The placement works by providing Munich Re with fully collateralized catastrophe protection for Japanese quake risk. However Zenkyoren, the National Mutual Insurance Federation of Agricultural Cooperatives of Japan, ultimately receives the cover through it’s reinsurance contract with Munich Re.

The risk transfer is designed so that the protection level for Zenkyoren increases after moderate earthquakes that don’t fully trigger the bond. Investors are in turn given a higher risk spread under such circumstances in order to avoid mark-to-market losses.

The deal has a parametric index, triggered by the location and peak ground acceleration of earthquakes as reported by a network of seismographs.

The deal was priced at LIBOR +4.40 percent with, matures in three years and was rated Ba2 by Moody’s.
The Muteki programme structure can allow Zenkyoren to transfer earthquake risks and other natural perils through future issuances for an aggregate volume of up to US$ 1bn.

Nearly 40% of the securities were placed with European investors by Munich Re Capital Markets.

Update: Muteki Ltd. was triggered by the 11th March 2011 earthquake off the coast of Tohoku Japan. The index value was calculated as 1,815 which was almost double the attachment level of 984 and well above the exhaustion point of 1400 meaning that the event constituted a 100% drop down event and caused investors to suffer a total loss of their $300m principal which Muteki will now pay to Zenkyoren.

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